2011: Winter Begins

December 28, 2010

My home state Michigan is a wonderful place for growing up, because all four seasons are crystal clear. It gets really hot in the summer. The landscape is rich with foliage for vivid autumns. It's "up north," which guarantees snow in winter. We lived near Lake Michigan, so we often got TONS of the white stuff, thanks to the phenomenon of "lake effect" storms. The transition from winter to summer was stark, so springtime was filled with new life and powerful storms.

Our house had two huge maple trees out back, which made for many Saturdays of raking during the fall. The upside was a bonfire for roasting marshmallows, a treat back in the days before the burning of leaves was outlawed. This print by contemporary master Charles Peterson brings back great memories. Autumn in Michigan also produced a brief season-within-a-season known as Indian Summer, a respite of warm weather that came after the first frost. Sometimes it lasted more than a week, but everyone knew what was coming next.

For television companies, Indian Summer is a perfect metaphor to describe 2010. It was a good year, revenue wise, thanks to the Winter Olympics in a North American time zone and the big mid-term elections. Political money can make amends for great deficiencies, and that was definitely the case this year. The economy seemed to ease, and that, too, had a big impact, because auto dealers began spending money on their favorite medium, television. We've just experienced a Christmas of big spending, so it's hard to believe that the economy is still stuck in a very weak place, but the truth is that recovery — this recovery — hasn't really happened.

Consumer confidence slipped this month, while economists had expected an increase. The reasons? Home prices falling, good jobs harder to find, gas prices up, and unemployment remaining high. Of course, consumers aren't economists, so what do they know, right?

According to the Bureau of Labor Statistics, nearly 10 percent of the workforce in the U.S. is out of work this holiday season. There's no "recovery" for people without jobs. Harvard economist Umair Haque says we're living in a "zombieconomy" and that an even bigger collapse is very much in the cards. The bank bailout accomplished nothing, according to Haque, except reward the people who created the crash in the first place.

Deloitte & Touche's John Hagel sees no recovery, writing that businesses run significant risks by only focusing on the near-term.

We continue to be seduced by near-term news, while losing any perspective on longer-term trends. These longer terms trends tell a very different story and suggest that we may be lulled into complacency by the short-term news of recovery.

...In our new book, The Power of Pull, we summarize the metrics that we developed for the (Deloitte & Touche) Shift Index — the first attempt to quantify the longer-term trends that have been re-shaping the business landscape over the past four decades. Of the 25 metrics in the Shift Index, one metric in particular stands out: return on assets for all public companies in the US. Since 1965, return on assets has collapsed by 75% - it has been a sustained and substantial erosion in performance. There is no evidence of any flattening of this trend, much less turning it around.

What does this mean? It provides strong evidence that any "recovery" is merely a short-term relaxation of pressure and that there will be no "back to normal." We often hear executives talk about the Red Queen effect where they feel they are running faster and faster to stay in the same place. The actual situation is far worse: we are running faster and faster and falling farther and farther behind. There is absolutely no reason to believe that the long-term performance erosion will not continue.

Hagel is talking about life in the fool's gold of weather, Indian Summer.

In 2005, we crossed a milestone in this country when the number of people self-employed went over 20 million. Data from the Small Business Administration put that figure over 21 million in the latest year for which the information was reported, 2008. By now, we expect that number is approaching 23 million, as more and more people — especially older people — set up eBay stores or find other ways to support themselves and their families online. These people are well-educated in the ways of the Web and don't spend their marketing money in traditional ways. This figure bears watching, for while they live and work in our communities and neighborhoods, the money they earn comes from everywhere. They are a part of a new subset of our economy, and as you can see by the graph, it's actually growing.

The only reality that matters, though, is that nothing occurred in 2010 that points to a recovery in the basic model of mass media. Moreover, there are considerable signs that paint a continuing difficult picture for media next year and beyond, and this includes television.

2011 will be another year of belt-tightening for all traditional media, especially those that are publicly owned. It'll be another year of floundering over what to do with digital, in part because economic realities will mean desperately hanging onto old dollars, once again, rather than spending those dollars on innovation. Broadcasters will continue their aggressive pursuit of cable subscriber money and the networks will continue to press for a bigger share of it. Meanwhile, cable will continue to lose subscribers, which can only end in problems for everybody. Mobile Digital Television will finally be birthed, but it won't mature fast enough to make up for losses overall. Meanwhile, the forces at work against legacy media will strengthen: the real time Web, the personal media revolution, the unbundling of anything and everything, advertisers spending money on themselves and the shifting of the Web to mobile. These are unmistakable and unfriendly trends for those who live entirely off the gathering of large audiences, whether those are aggregated or in a single theater.

There will be no magic bullet in 2011 for media companies. The experiments with paywalls will fail, utterly, and when media executives close their eyes at night, the passing of Indian Summer will make sleep difficult. It's over, and acceptance is the first step towards reinvention.

With each passing year, the evidence mounts that we're leaving the industrial age for information age territory. This is terribly important for media to understand, because the shift is far beyond our control; we just happen to be a visible victim of the passage. The information age has its own rules, its own paradigms, its own value propositions and much more. Everything about it shrieks "chaos" to those trained in 20th Century business practices.

But as Umair Haque says in The New Capitalist Manifesto, the biggest mistake any business can make today is bringing yesterday's ammunition to today's battle. It's a scary, new world that is, in many ways, the opposite of what the industrial age brought.

INDUSTRIAL AGE

INFORMATION AGE

Top-down

Collaborative

Managing

Leading

Centralized

The Edges

Domination

Responsiveness

Brands

Individuals

Scale

Flexibility

Cost Advantage

Loss Advantage

Competitive Advantage

Constructive Advantage

Differentiation

Making a Difference

Haque uses a word that I like for media in the 21st Century: mattering. A simple emphasis on that will make a huge difference in not only the way we run our companies but also in the products and services we produce. It leads to what he calls "thick value" in an era that has little tolerance for the selfish advantage-taking of business circa 20th Century.

For television stations and their owners, here are ten things that we can do next year to move ourselves into a more 21st Century-friendly business model:

Let our brands become real instead of just slogans. To do business in the information age, we need to be authentic. The hyperconnected Web simply doesn't permit BS, and for too long, our slogans have been just that. If our brand represents something that contributes to the culture, then we should pursue it with vigor and openness and avoid any of the trappings of phoniness. Slogans won't last a minute in the new world. They are, in fact, one of the many facets of contemporary marketing that people are actively trying to avoid.

Decentralize. Local control matters. As economist Haque notes, anything with the word "central" in it is doomed in the new economy. Doing business today means making a difference, not mining efficiencies to manage the bottom line. Our real strength is at our edges, with our people and their ability to get the job done. Sometimes, the best strategy is to get out of the way, and that's a problem for 20th Century managers. We get caught in the old, because the new business world isn't top-down; it's outside-in.

Move to real time. As media companies, we must admit that packaged, finished and polished programs no longer fit the definition of "news," and if we want to be relevant, we must fully embrace the world of real time flows and streams. It can be messy. Speed is its top value. It's ongoing. It's unbundled and distributed in streams. It mingles with other streams to create the flow that IS news. We stand no chance in the news world of today outside the banks of this great real time stream.

Embrace chaos. The problem with the word "chaos" is it only seems disorderly to those who demand order, those who believe that order is the "right" way to function in the business world. Chaos doesn't have to be chaotic; it simply means fixing our focus on the goal and not the processes for reaching that goal. We need to be quick, nimble and flexible to meet constant changes and respond, and those values are often anathema to orderly processes.

Collaborate, with our former competitors and with our audience. We must give up the notion that our competitors are those trying to do the same things we're doing. This is the great illusion of the news world today, for we're all in the same sinking boat. We don't wish to be the last one standing, for the boat's ultimately sinking anyway; we want to be creating new value, lasting value that will carry us to decades of prosperity. That may actually mean working with our current competitors. Fighting to maintain our place — and focusing only on that — is suicide, when those who are taking our money have nothing to do with our position among the other media companies.

Meanwhile, the new age we've entered — this information age — is a collaborative, participatory age. Working alongside those we serve is the only path to relevance, and that is the road we must take. Jay Rosen's "people formerly known as the audience" are each little publishing companies, and we would do well to treat them as such. Tomorrow's media is collaborative media.

Be leaders. Aggressively pursue an editorial agenda that will better the quality of life in the communities we serve. We can no longer stand on artificial high ground and "report" the news; we must get proactively involved and be contributory to the betterment of the culture. This won't be a one-size-fits-all common denominator. It will, of necessity, be controversial. But that's the world of the future for media, because objectivity has been proven to be inadequate to the task of an informed, let alone participatory populace. We used to call this "community journalism," but we must consistently perform in this arena now, because we are actively pursuing Haque's concept of "thick" value in what we create.

Promote and empower the personal brands of our employees. Our greatest edge competency is our people. It is they who must take the challenge to the hyperconnected universe and be competitive. Their brands can go where ours can't, and they can bring people back that we would never reach otherwise. We must empower our employees to speak and act on our behalf, not try to control their every move so as to protect a fraudulent, unbiased stage. This seems scary to the orderly management world of the industrial age, but it is essential in the fast-paced world of the information age.

Pursue transparency and authenticity. Abhor artificiality at any level. There is most certainly a role for professional observers and journalists in the new media world, but not as the "voice of God" presenters of the past. Contrary to their image, for example, news anchors are not always the brightest bulbs in the package, nor are they always the top journalists in the newsroom, let alone the community. This kind of contradiction won't last long in the new business world, for hyperconnectivity turns anything artificial into a liability, and especially in an area like news that is dedicated to truth. Transparency and authenticity, along with speed, are the new values of journalism.

Practice attraction principals, not promotional "teasing." When TV news departments do what's called "deep teasing" in newscasts, they alienate many people, and that is an enormous risk in the new world. Deep teasing involves a "coming up" item that's not really coming up; it's on the rundown for after the final commercial break in the newscast. This is deceptive and flows from the idea that we can do whatever we want, because we can. It's a disrespectful practice that people hate, and it turns people off. Such tactics do great harm in building a reputation of honesty with people, and all such practices need to be stricken from our playbooks, including breaking stories in multiple pages online, so that we can expose people to more ads. We must attract people, not push them away.

Place the people we serve above ourselves. This goes along with number 9, but it includes much more. We serve people, and no servant is above the one they are serving. If we want to attract people, we must respect them and treat them accordingly. That includes talking to people when we're busy and paying attention to what they're saying. It means answering the question posed on Facebook and following people on Twitter who follow us. Nobody likes a snob, and yet, media companies are notorious for acting as such with their fans. This need to respect includes everything about the business of news, from the stories we choose to how they are presented. The worst crime in any newsroom is disrespecting the audience.

BONUS RECOMMENDATION: Fire our attorneys and hire new ones with balls. Lawyers can either be the stopper-doers of the new world or those who pave the way for change. Our old corporate lawyers, those who milk us for millions while they propose only the safest, most conservative courses of action are a weight around our necks at a time when we must move at light speed. We'll accomplish nothing with them, so let's just kick them to the curb. We need First Amendment, net neutrality, and openness champions, and I know they're out there.

How, you say, will these translate to revenue growth? That's a trick question, for before we can have revenue growth, we must first find relevancy as a media company in the 21st Century. From there, we can work on the revenue problem, but if revenue drives the train from the get-go, we will, by default, cede media control to those who are coming up between the cracks. In a sense, it's still about people and eyeballs, but we must be thinking in terms of data about people and not mass audiences. It's no longer good enough, for example, to say or do whatever we wish just because we have a microphone. Everybody has one of those now, and that's both bad news and good news. It means, however, that we must function differently.

The need to serve the quarterly report and simultaneously reinvent is a difficult one. It demands at least some investment, which, I believe, can be recouped in both the short and long term. It's also about thinking smarter and, for once, being honest with ourselves about what's really happening around us. It's broken. Period.